The case alleged that an employer committed two violations of the FCRA:

1.) The employer disqualified job applicants on the basis of information from a consumer report without appropriate disclosure forms from the applicant, and

2.) After disqualifying the applicant, the employer failed to give the applicant a reasonable period of time to dispute the information contained in the report before refusing to hire that applicant. In other words, the class action suit alleged a violation of the “pre-adverse action” requirements whereby a an applicant to a reasonable time to review and dispute the background check report before a final action is taken to deny employment.

The attorneys for the plaintiff are seeking statutory damages and punitive damages. The FCRA also provides for attorneys’ fees.

The case revolves around the federal rules for “certifying” a class so that a class action can proceed. A class action suit allows the claims of numerous potential plaintiffs to be heard in one legal case, rather than separate legal actions that each person would have to bring. In its decision, the Court engaged in a preliminary analysis to determine if the case had merit. The Court noted that at the current stage of the litigation, the plaintiff had stated a claim sufficient for certification of the case as a class action.

The court reviewed the fact that the FCRA requires that an employer obtain a disclosure on a standalone document separate from the employment application. The purpose is to make it clear to an applicant that a background check may be obtained. In this case, the court noted that there was no dispute that the application form signed by the plaintiff was not a “standalone form” but was contained in the form with more than one disclosure and more than one release.

Furthermore, the Court noted that under the FCRA, an applicant is entitled to a notice of “pre-adverse action” before a decision to not offer a job is made final, so that an applicant can dispute the report. The plaintiff contended that an applicant is entitled to at least five business days, which was the time period that an opinion letter from the Federal Trade Commission (FTC) found to be reasonable. (See the Weisberg letter at: http://www.ftc.gov/os/statutes/fcra/weisberg.shtm.) If a decision is made final, an applicant is entitled to a second letter that contains a notification of certain rights.

In this case, the evidence showed that the first letter sent advising the applicant of derogatory information in her background check report was sent December 18, 2006. The second letter notifying her that she would not be hired was dated December 22, 2006, which was four days later.

The employer argued that the FCRA was silent as to the amount of time needed between letters, and that the FTC opinion letter is not legally binding. However, the court ruled that an FTC opinion letter is entitled to “respect,” and was sufficient at that point in the litigation to allow the plaintiff to state a claim that the FCRA was violated. The Court found that although five days may not be required as a matter of law, it was a jury issue if the plaintiff was given reasonable times to dispute the information in the report.

The case also underscores the fact that background checks are heavily legally regulated, and that employers are best served by working with a professional background screening firm that provides assistance with legal compliance, and not just a data vendor that sells reports. Although a background screening firm cannot provide legal advice, a background screening firm can currently advise an employer on basic compliance issues and industry standard approaches.

(ESR’s policy is to not identify any parties during litigation. However, if an attorney or researcher would like to know the name of this case, please email ESR News Editor Tom Ahearn at tahearn@esrcheck.com.)